MUMBAI: One good thing about the current market rally, brokers say, is that there are less-leveraged positions compared with the bull run in 2007-08. But that may be about to change soon. The National Stock Exchange ( NSE) has added 23 firms on its list of securities, in which traders can buy and sell F&O contracts. Notable among them are Jet Airways, Tata Motors DVR, IndusInd Bank, Bombay Dyeing, Bajaj Holdings, IRB Infra, and SREI Infra. The changes, effective from October 29, will expand the number of F&O eligible securities to 224.

This is the largest single addition to the F&O list since September 2008, when the bourse had added 39 securities at one go. The move also coincides with its rival the BSE's renewed attempts to revive its comatose derivative segment.

The advantage of betting on stocks through futures and options contracts is that a trader needs to pay only 25% as upfront margin, and can hold on to that position till the last Thursday of every month, when derivatives trades are settled.

But some brokers are sceptical if the latest addition to the F&O segment will boost the exchange's traded turnover significantly.

"The liquidity is centred around a few contracts despite the periodic addition to the list," says ST Gerela, CEO, Satco Securities, and advises retail investors to avoid trading in illiquid contracts.

For instance, the bottom 50 securities out of the 201 companies in the current F&O list had an average daily turnover of less than `50 crore in the past four months. Only 75 companies had an average daily turnover of `100 crore or more.

And neither do brokers see any benefit to their bottomlines from the increased number of securities available for derivatives trading. That's because traders now prefer to play their leverage bets through option contracts — where the buyer can walk away from the trade by forgoing a small premium — rather than through futures contracts, where profits and losses can be huge. This has caused a decline in broking firms' revenues.

Broking commissions on futures trades are charged on the full value of the transaction, while in an option trade, they are charged as a percentage of the premium, which is a small fraction of the turnover.

Between January 2007 and September 2008, the number of companies in the NSE's F&O list increased from 150 to 266. Most promoters of mid-cap companies viewed the inclusion of their stocks in the F&O list as a status symbol and are known to have thrown parties to celebrate the 'event'.